Wednesday, October 19, 2011

The last few days have provided a great deal of ammunition for those lamenting the state of football, specifically the seemingly inevitable march towards a game completely dominated by financial matters. The charge was led by Liverpool’s managing director, Ian Ayre, who suggested that the leading clubs should receive a larger slice of the money from overseas TV rights, as the average fan in Kuala Lumpur “isn’t subscribing… to watch Bolton.”

Ayre adopted the language so beloved by marketing men the world over by adding, “Personally I think the game-changer is going out and recognising our brand globally.” Although this statement would score highly in a game of corporate buzzword bingo, it provoked a scathing response from the football community, which roundly condemned the apparent avarice behind these cringe inducing words.

If his intentions weren’t clear enough, Ayre whistled a version of the Pet Shop Boys’ “Opportunities (Let’s Make Lots of Money)”, while he explained his grand plan, “Maybe the path will be individual TV rights like they do in Spain.” The only problem was that the other football clubs did not seem to match his enthusiasm to rip up the status quo (at least publicly), so Ayre rapidly back-tracked via a clarification that this initiative wasn’t in fact “about Liverpool trying to breakaway and sell their own rights.” Oh no, it was purely about the way that the Premier League distributed its international rights.

Clearly, any idea that apparently involves applying the opposite approach to Robin Hood, namely to take from the poor to give to the rich, is likely to attract a huge degree of opprobrium, but before Ayre is completely dismissed out of hand, it is surely worth asking the simple question: does he actually have a point? In addition, we should try to understand the factors driving a (presumably) rational man to stick his head above the parapet in such a masochistic manner.

Looking at the distribution of the Premier League television money in 2010/11, we can see that Liverpool received £55.2 million, which incidentally was £12.3 million more than Bolton’s £42.9 million. A great deal of the money is shared equally: 50% of the domestic rights, which is worth £13.8 million to each club, and 100% of the overseas rights, worth £17.9 million to each club. However, 50% of the domestic rights is allocated in a way that does favour the leading clubs.

For these funds, 25% is for merit payments, determined by the club’s final league position, and 25% is paid in facility fees, based on how often a club is shown live on television. Each place in the league is worth an additional £757,000, which can make quite a difference, so Liverpool’s sixth place delivered £11.4 million last year, while Bolton only received £5.3 million for fourteenth place. Similarly, it’s no surprise to see that the top clubs feature much more often on television than those lower down the league, so Liverpool’s 23 appearances produced a £12.1 million facility fee, compared to Bolton’s £5.8 million, which was a result of the guaranteed minimum 10 appearances.

Nevertheless, although this algorithm does benefit the leading clubs, it is not a gigantic benefit. Ayre’s issue is with the overseas rights, which are distributed entirely in equal shares, as opposed to the domestic rights, which to a degree reflect performance and popularity.

In the past, this would not have been a concern, but the point is that this is now serious money. First of all, the growth in payments secured for TV rights has been nothing short of astonishing, from the initial £253 million five-year deal in 1992 to the £3.4 billion payment three-year deal that commenced last season. To make that spectacular progress even clearer: the original deal was worth just £50 million a season, while the latest brings in more than £1.1 billion a year.

That’s obviously fabulous news for football clubs, but closer examination of the new rights deals reveals an interesting (and potentially worrying) trend. Revenue for the sale of domestic TV rights (live matches and highlights) hardly grew at all in the new contract, implying that the home market may have reached saturation point. Instead, it is overseas fans that have been behind the explosive growth with the revenue more or less doubling each time that the rights are re-negotiated: 2001-04 £178 million, 2004-07 £325 million, 2007-10 £625 million and 2010-13 £1.4 billion.

To place that into context, in 2001-04, the overseas rights accounted for only 11% of the total deal, while they are now worth 42% with many analysts predicting that they could be higher than domestic rights after the next deal is signed. Therefore, what was previously the icing on the cake is now a very substantial slice, so it was really only a matter of time before the top clubs pointed out the anomaly between the different allocation methods used for domestic and overseas rights.

"Bolton - not popular in Kuala Lumpur apparently"

Some of the money paid to secure overseas rights seem barely credible: the Abu Dhabi Sports Channel paid over £200 million for the Middle East and North Africa (almost three times the £80 million paid by previous incumbent Showtime Arabia); in Singapore, an island with a population of less than 5 million people, SingTel paid £200 million to secure the rights from its rival StarHub; similarly, in Hong Kong i-Cable paid nearly £150 million, much more than the £115 million Now TV paid last time around.

Given these amazing statistics, Manchester United manager Sir Alex Ferguson has suggested that broadcasters should pay even more for the rights to live football, “When you think of that, I don’t think we get enough money”, though he appeared more concerned about television’s impact on his team’s fixture list.

That said, the Premier League’s TV rights deal is the envy of other leagues. At £1.1 billion a year, it is well ahead of the rest with only Serie A (£0.9 billion) coming close. Incredibly, the deal is twice as much as La Liga (£0.5 billion) and three times as much as the Bundesliga (£0.4 billion). The principal reason for the disparity is the overseas rights, which are worth nearly £0.5 billion in England, but are negligible everywhere else. This helps explain why English clubs are increasingly focused on this element of the deal.

This argument is further supported by looking at how other major leagues distribute their TV income. In England the current deal works out at 67% of the revenue being allocated by means of an equal share with 17% based on on-pitch performance and the same amount on popularity, defined as the facility fee for number of times a club is broadcast live. No other league distributes as anywhere near as much via an equal share.

The closest is France, where the equal share comprises 50%, while the remainder is distributed based on league performance 30% (25% for the current season and 5% for the last five seasons) and the number of times a team is broadcast 20% (over the last five seasons).

Italy returned to collective bargaining this season with 40% divided equally among the Serie A clubs; 30% is based on past results (5% last season, 15% last 5 years, 10% from 1946 to the sixth season before last); and 30% is based on the number of fans (25%) and the population of the club’s city (5%).

TV revenue in the Bundesliga is divided among clubs via a points system based on their league position over the past four years. Performance is weighted in favour of the more recent years, so last season a factor of 4 was applied to 2010/11, 3 to 2009/10, 2 to 2008/09 and 1 to 2007/08. However, a form of equality is then applied, as the club with most points only receives twice as much money as the club that has the lowest number of points.

La Liga allows each club to arrange its own individual deal, which is largely attributable to popularity, though you could argue that some of this is derived from past performance. No matter, it is clear that none of the money is allocated via an equal share.

In summary, with the exception of La Liga, every major league distributes a good proportion of the TV funds equally, either explicitly or via the weighting of the allocation. However, the Premier League distributes more money this way than any other league, mainly due to the surge in overseas rights.

The result is that the ratio from top to bottom earning clubs in terms of TV payments is much smaller in the Premier League at 1.5, especially compared to La Liga where it is 12.5. So, last season Manchester United received £60 million, while Blackpool got £39 million. In contrast, Barcelona and Real Madrid received around £123 million, while Malaga had to make do with £10 million.

That’s bad enough, but the real issue in Spain is that the drop starts immediately with third placed Valencia only receiving £37 million, so the big two earn at least three times as much TV money as their closest challengers. Every other league is more equitable with the top team earning between 1.1 and 1.2 times as much as the third highest earner.

"Pictures on my wall"

It is however true that the Premier League still has the smallest ratio between top and bottom clubs with 1.5 against 2.0 in Germany, 3.5 in France and 10.0 in Italy (the gap in Serie A will reduce after the introduction of collective bargaining). This is largely due to the impact of the rise in the value of the overseas TV deal, as this ratio was almost three to one in the early days of the Premier League.

In other words, the TV deals at Barcelona and Real Madrid are very much the exception to the rule, so Ayre’s “unfair” comparison only really works for these two behemoths and not for the hundreds of other clubs in Europe. In fact, Liverpool’s TV deal compares favourably to everyone else, especially now that Italy’s clubs have switched from individual arrangements to collective bargaining.

The winds of change have even hit Spain with a proposal to reduce Barcelona and Real Madrid’s share of the combined TV revenue from 45% to 34%, though they seem to be blowing rather slowly, as this would still provide them with a massive competitive advantage and any move towards revenue sharing is unlikely to be implemented before 2015/16.

From the perspective of the lesser lights in England, TV money is critically important to their prospects. In 2009/10 television accounted for a staggering 70% or more of revenue at clubs like Wigan Athletic, Blackburn Rovers and, yes, Bolton Wanderers. Without this money, these clubs simply wouldn’t be able to compete and might even struggle to survive. According to Wigan chairman Dave Whelan, “We will finish up like the Spanish league with just two teams in it, no competition, no anything, no heart and soul.”

Some might argue that no more than six clubs could realistically mount a title challenge in any case, but “on any given Sunday” (or Saturday) any team in the Premier League is capable of winning against “the big boys”, as Sam Allardyce used to describe them.

However, TV money is also of great importance to the top clubs, as evidenced by the most recent Deloitte Money League that shows that television is the largest revenue stream for 16 of the top 20 clubs. The only exceptions are three German clubs that place more emphasis on commercial operations and Arsenal, thanks to the money-spinning Emirates stadium.

In England, TV rights have driven the virtuous circle often referenced by Premier League chief executive Richard Scudamore, “The continued investment in playing talent and facilities made by the clubs is largely down to the revenue generated through the sale of our broadcast rights.” Put another way, English clubs need strong revenues to compete with their European rivals when trying to attract world-class players, both in terms of transfer fees and wages, which is surely one of the main reasons behind Ayre’s intemperate outburst.

He will have recognised that Liverpool have been growing their revenue much more slowly than their peers. In 2005, Liverpool’s revenue of £122 million was £44 million lower than Manchester United and £120 million behind Real Madrid. In 2011, the gaps have widened to £144 million and £234 million respectively. That means that Real Madrid, Barcelona and Manchester United earn around twice as much as Liverpool, which is an enormous shortfall every season.

The inequality is growing all the time, as Liverpool’s revenue has essentially been flat for the last three years. In 2011, the improvement in commercial income thanks to the new Standard Chartered shirt sponsorship has been offset by the failure to qualify for the Champions League. It’s a similar story of lack of growth at Arsenal, though their revenue did overtake Liverpool after the move to a new stadium.

The harsh reality in football is that money does tend to buy success, so Liverpool have to explore every possible avenue of generating additional revenue and their options are limited. In particular, they are hamstrung by Anfield. Although this is a wonderfully atmospheric old ground, redolent with history, it lags behind the others in terms of money-earning potential.

Its capacity is only 45,400, which is much less than Old Trafford (76,000) and The Emirates (60,400). As Ayre said, “We are 30,000 seats behind our biggest competitor and that’s worth a lot of money.” In fact, Liverpool’s match day revenue of £43 million is less than half of Manchester United (£108 million) and Arsenal (£93 million), while even Chelsea, whose Stamford Bridge ground is even smaller (41,800), generate more than them (£67 million). Liverpool only earn around £1.6 million from each home match, which is significantly less than United (£3.7 million) and Arsenal (£3.3 million).

This structural weakness has been exacerbated by Liverpool’s failure to qualify for the Champions League. In 2010/11 Liverpool battled their way through to the last 16 of the Europa League and received €6 million (£5.4 million) for their efforts. In contrast, the four English clubs in the Champions League enjoyed an average of £35 million, excluding gate receipts and bonus payments from sponsors. After reaching the final, Manchester United collected a hefty £47 million.

Of course, this does rather suggest that one old-fashioned way for Liverpool to grow their revenue would be to do the business on the pitch, which would not only boost their coffers with higher performance payments, but would make them more attractive to prospective sponsors. This is a winning combination that has propelled Manchester United’s commercial income above £100 million, assisted by the significant global TV exposure.

The impact can be clearly seen by looking at the composition of English clubs’ TV revenue. The payments from the Premier League are much of a muchness, but the real “game-changer” (to use Ayre’s own word) is the Champions League. Yes, qualification for the Europa League helps, but the money is only around 20% of that earned by clubs in Europe’s flagship tournament.

Interestingly, English clubs receive a higher proportion of the TV (market) pool in the Champions League, due to England’s television deal being bigger, which produced the bizarre result of losing finalists Manchester United actually receiving more money than the winners Barcelona.

Currency movements have also helped English clubs, as Champions League money is distributed in Euros, which, despite recent travails, has strengthened against Sterling in the last few years. Although this is a moving target, it is a factor that should be considered when making comparisons with clubs from the continent, as this has contributed to the relative improvement by the likes of Barcelona and Real Madrid against English clubs.

Now that we have established some of the reasons why Ayre might seek to increase his club’s share of television revenue, we should explore whether such a move would actually increase revenue.

"Our house, in the middle of our street"

The Premier League believes that its international appeal is largely down to a model that delivers competitive matches, which is in stark contrast to the procession offered by La Liga, where the third-placed team has finished 21 and 25 points behind second place in the last two seasons. Indeed, Sevilla’s president Jose Mari del Nido described the Spanish league as “a load of rubbish”, because only two teams could conceivably win the title.

While there is a lot of truth to this argument, it is not necessarily the full story, as it’s not as if the upper echelons of the Premier League have been anything but a closed shop since its formation. The traditional “Sky Four” (Manchester United, Arsenal, Chelsea and Liverpool) have rarely been threatened, though Manchester City have now become a highly credible challenger, thanks to the injection of oil millions.

Furthermore, if a competitive league were the only reason for success in overseas sales, then surely the Bundesliga would be the viewers’ preferred choice, but, as we saw earlier, the Germans’ overseas rights of around £40 million are less than 10% of the money received by the Premier League.

"Global A Go-Go"

That said, although it is far from certain that reducing the Premier League’s competitive nature would reduce revenue, intuitively we can probably conclude that this would weaken the bargaining position of its marketing men, who, in fairness, have done a superb job to date.

Looked at from another perspective, we do have tangible evidence from Italy that moving from individual rights to a collective system increases revenue, as broadcasters pay a premium for having the whole product rather than the rights to individual clubs. In fact, the new Serie A deal is on course to meet its target of €1 billion, which represents a considerable improvement on the aggregate of the previous individual deals. Spanish football expert, Professor Jose Maria Gay de Liébena from the University of Barcelona, believes that introducing collective bargaining would boost total TV revenue for La Liga from €600 million to €900 million.

Therefore, Ayre’s fondness for individual rights might not produce the gains he envisages, as it is entirely possible that Liverpool would merely receive a larger slice of a smaller cake.

Of course, after Ayre’s “clarification”, we now know that his proposal was restricted to international rights. If that is indeed the case, then it is difficult to see why he would risk so much contempt for so little reward. Assuming that he wanted to allocate these rights in the same manner as domestic rights (50% equal share, 25% merit payment, 25% facility fees), then that would have produced an increment for Liverpool of only £4.3 million in 2010/11 (and incidentally a reduction for Bolton of just £2.7 million).

Of course, the potential future increase in overseas rights may make such an amendment more valuable, while Ayre may have been thinking of another distribution methodology that was more favourable to his team, e.g. 50% for Liverpool and 50% for Manchester United. Only kidding.

In fairness to Liverpool, if they wish to remain competitive in a world where they once reigned supreme, they need to address the financial imbalances caused by the money pumped into the game by Roman Abramovich at Chelsea and Sheikh Mansour at Manchester City, which has inflated transfer fees and wages for every other club. Despite the advent of UEFA’s Financial Fair Play regulations, other clubs have also been boosted by wealthy benefactors, such as Paris Saint-Germain, Malaga and Anzhi Makhachkala.

"John W Henry - This is the modern world"

Liverpool’s owners are cut from a different cloth. Although John W Henry’s Fenway Sports Group (FSG) is a clear improvement on the reviled duo of Tom Hicks and George Gillett, they are far from following the classic sugar daddy model. Instead, this is a group of savvy businessmen who will seek to manage the club well, aiming to maximise revenue and ideally get a return on their investment. This is no different from other American owners like the Glazers at Manchester United, Stan Kroenke at Arsenal, Randy Lerner at Aston Villa and Ellis Short at Sunderland.

While in many ways their ownership will benefit their clubs, it would be naïve in the extreme not to appreciate that they have been attracted by the financial possibilities offered by the Premier League. In contrast to sports franchises in the US, where they have to share all revenue received, including TV money, gate receipts and merchandising, in the Premier League they keep the vast majority of revenue earned.

This was confirmed by Liverpool chairman Tom Werner, “That is the difference with the EPL. If we can generate interest in Liverpool here and around the world, we will benefit from that.” That comment also touches on the other attractive aspect of the Premier League for American investors, namely its global appeal, which again is not something enjoyed by sports like baseball, basketball and American football.

"I am the son and Ayre of nothing in particular"

So that’s the plan, but Ayre raised another point that gave pause for thought, which was that the Premier League bubble might “burst, because we are sticking to this equal-sharing model”. He was specifically referring to La Liga’s ability to attract the top players from the Premier League, which seems like a blatant attempt at scaremongering, given that there’s no shortage of imports from Spain, such as Juan Mata and David Silva, while Cesc Fabregas’ return to Barcelona was a special case. In any case, there are other equally important factors at play here, such as currency and tax rates.

However, there are a few threats that might endanger owners’ strategy of coining it from television, which are primarily due to: (a) economic pressures on the Premier League’s customers, i.e. the TV channels; and (b) regulatory decisions.

TV channels are not immune from the recession, as we saw when ITV Digital and Setanta went bankrupt. Although the latter’s collapse did not in itself prove problematic, as ESPN snapped up the TV rights relinquished by Setanta, if Sky were to hit financial difficulties this would be extremely serious for the Premier League and by extension the clubs. This may not seem likely, but it is not beyond the realms of possibility. For example, Mediapro, the company that owns the TV rights in Spain for La Liga, applied for bankruptcy protection last year.

"And it's... LIVE!"

On the other hand, it is clear that the Premier League is central to Sky’s business model. Of the satellite company’s nine million customers, around five million of them pay for the sports package, earning Sky some £2.5 billion a year. On top of that, pubs pay Sky huge sums for licences to show matches. Admittedly, the sports package contains more than just football, but the Premier League is the jewel in the crown, so must be responsible for most of that business.

In these days of multimedia with countless entertainment possibilities, television viewing figures are declining across the board, but average audiences for live football matches have remained consistent. This is particularly important for companies struggling to push their brand through traditional advertising.

Perhaps a more plausible possibility is that broadcasting companies would seek to end the cycle of ever increasing payments for TV rights, as happened recently with the new Ligue 1 deal in France.

The courts of law might also pose a threat to the television money enjoyed by Premier League clubs. A recent ruling by the European Court of Justice in a case brought by a Portsmouth pub landlady stated that broadcasters cannot prevent customers from using cheaper foreign satellite television services to watch Premier League football. As Sky /ESPN will no longer have exclusivity in the UK market and are likely to be under-cut by foreign broadcasters, the theory goes that they would have to lower prices to compete and so pay less for the TV rights.

"Richard Scudamore - One way or another"

However, to date the Premier League has proved very adroit at finding creative solutions to such challenges, so it would not be a great surprise if it found a way to maintain (or even grow) its revenue. The likeliest outcome is that they would market one pan-European rights package, though other options are also possible, such as launching their own TV channel, as the Dutch Eredivisie has done, but this would be a pain and more complicated than working with professional broadcasters.

Another possibility might be to sacrifice the continental European revenue, which represents around 16% of all European rights (£390 million), in order to protect the significant £2 billion of UK revenue by stopping sales elsewhere in Europe.

Finally, this might just be a storm in a teacup, as in practice very few subscribers would switch to a foreign language service. Although many of Sky’s commentators and pundits are not that popular, they’re surely easier on the English ear than their Greek or Polish equivalents.

However, English clubs could face a sizeable reduction in their Champions League revenue as a result of the ECJ ruling. William Gaillard, adviser to UEFA president Michel Platini, warned, “This may force us to sell the rights on a Europe-wide basis, which would prevent us from identifying individual national TV pools. That will be bad news for clubs in big TV markets such as England.” This is a genuine threat, as the current £400 million deal with Sky and ITV is the biggest in Europe.

"Boy with a problem"

Another regulatory factor arises from UEFA’s Financial Fair Play regulations, which force clubs to break-even if they want to compete in European tournaments. This means that most clubs will either have to cut costs (effectively wages) or increase revenue from football operations, which again helps explain why Liverpool have dared to question the distribution of the TV money. Indeed, when John W Henry bought the club, he said, “With the FFP rules, it is really going to be revenue that drives how good your club can be in the future.”

Of course, the introduction of FFP does in itself raise questions about the inherent unfairness of clubs like Barcelona and Real Madrid being able to sell their TV rights individually, as this clearly provides them with a monetary advantage over clubs in other leagues.

Looking further ahead, advances in technology could provide a threat to revenue (via illegal internet streaming) or a major opportunity to make even more money. There is little doubt that overseas investors see huge potential in football clubs’ TV rights. As John W Henry said, “American owners understand media and the long-term global implications. They're going to want to reach their fans in the new media landscape. The Premier League was created in response to changing media. Audiences will drive leagues rather than the other way round.”

"Werner - Ground control to Major Tom"

This is particularly relevant to Liverpool, as FSG have substantial expertise in this sphere, owning 80% of New England Sports Network, a regional cable television network, while chairman Tom Werner is an experienced television producer. To give an idea of the size of the prize, the value of the New York Yankees’ official cable network is three times as high as the club itself.

It is equally clear that foreign owners see great promise in online delivery, hence Stan Kroenke’s purchase of a 50% share in Arsenal Broadband long before he launched his takeover bid for the whole club. Indeed, the emergence of fast broadband networks might be the catalyst for clubs to launch their own channels to interact directly with their fans.

That’s all future music, but in the here and now what are the chances of Ayre’s TV rights initiative succeeding?

In practical terms, such a change would require a two-thirds majority at the annual shareholders meeting, so 14 of the 20 Premier League clubs would have to approve the plan. However, not one club has come forward to provide support, leaving Ayre to change his song of choice to The Beautiful South’s “I’ll Sail this Ship Alone”. Given that turkeys are unlikely to vote for Christmas, it is no surprise that smaller clubs are not in favour, but all of the leading clubs have also praised the concept of collective selling.

"Glazers - What do I get?"

Even Manchester United, who would benefit most from such a move, said via their chief executive, David Gill, that “the collective selling of the television rights has clearly been a success.” There is still a suspicion that some clubs may be considering the idea privately, e.g. there are rumours that John W Henry has discussed the plan with the Glazers, but for the moment the idea appears to be dead in the water.

Nevertheless, it is obvious that football clubs are now prepared to think out of the box in order to grow their revenue. It does not take a particularly large leap of imagination to see that this idea is part of a grander strategy to form a European Super League, as hinted at by Ayre’s decision to compare Liverpool to Barcelona and Real Madrid while attempting to justify the change.

Wigan chairman Dave Whelan thundered, “They want to take all the money for themselves, but they know the top six cannot play each other every week, so they will eventually look to Europe and the creation of a European league.” He found a surprising bedfellow in Real Madrid’s former General Manager, Jorge Valdano, who said that the overwhelming domination of the big two in Spain would inevitably lead them to abandon Spain for a European league.

"Slave to the rhythm"

Whatever Ian Ayre’s intentions were in raising this subject, there is a sense that this is only the beginning in terms of clubs exploring new revenue opportunities. Most fans would understandably be against his views, but as he said, “It’s a real debate that has to happen”, and it’s not going to go away that’s for sure.

In any case, it’s hardly a bolt from the blue that a club from a league formed with money as its primary focus should look for ways to earn even more, especially as football has become big business in recent years. Whether it be the inflationary impact of mega-rich benefactors or the desire of owners to make a return on their investment, money has become the name of the game.

Much of that is down to the huge amounts of cash provided by television, which on the plus side has helped to fund investment in new stadiums and to attract top players to England, but has also driven some questionable priorities. As Sir Alex Ferguson said recently while commenting on the increasing influence of television, “When you shake hands with the devil, you have to pay the price.” That may be a touch over-dramatic, but there are undoubtedly some uncomfortable issues around football’s cosy relationship with the television. Following his elevation to pariah status, Ian Ayre for one would surely now agree that the sun does not always shine on TV.

Thursday, October 6, 2011

Just a few months ago Arsenal were riding high, as they still had credible chances to win trophies in four competitions. However, a late defeat to unfancied Birmingham City in the Carling Cup final initiated an awful sequence of events. Elimination by Barcelona in the Champions League was maybe predictable, though hopes had been high after a scintillating victory in the first leg, but the collapse of form in the Premier League was less understandable.

The fans were not best pleased by the club’s decision to raise ticket prices by 6.5% after another disappointing end to a season, especially against the backdrop of a takeover by one of the world’s wealthiest individuals, Stan Kroenke. Their mood was not exactly improved when the club sold its best two players, Cesc Fàbregas and Samir Nasri, in the summer.

Although there were sound reasons for these departures (Fàbregas wanted to return to his home town team; Nasri was entering the final year of his contract), it still seemed to underline Arsenal’s diminishing status and reinforce the label of a selling club. As manager Arsène Wenger said a few weeks earlier, “Imagine the worst situation, that we lose Fàbregas and Nasri. You cannot convince people that you are ambitious after that.”

"Oh Mickey, you're so fine"

That was a bitter pill to swallow, but could have been sweetened by the arrival of world-class replacements. The rumour mill spoke of hefty bids for the likes of Eden Hazard, Yann M’Vila, Mario Götze, Juan Mata and Santi Cazorla, but the fans had to make do with the last minute arrival of lesser lights like Mikel Arteta, Yossi Benayoun, Per Mertesacker, André Santos and Park Chu-Young. All fine professionals, no doubt, but not really the players to take Arsenal to the next level. These purchases in the latter stages of the transfer window smacked of desperation, rather than any coherent strategy.

The early signs for the new Arsenal have not been promising, as the club has endured its worst start to a campaign for over 50 years. Although the club has done pretty well in the Champions League, drawing away to Borussia Dortmund and winning at home against Olympiacos, the performances have not displayed Arsenal’s customary assured passing style. In the Premier League, it has been even worse with four defeats in the first seven games, including a humiliating 8-2 thrashing by Manchester United, a scarcely believable 4-3 loss to Blackburn Rovers and, most painfully of all, a 2-1 reverse against Spurs in the North London derby.

Arsenal’s support has always found some comfort in their self-sustaining business model, as the performance off the pitch has been the envy of most other clubs. However, even here, matters appear to have taken a turn for the worse in the recently announced financial results for 2011 with revenue falling from £380 million to £256 million and profit before tax declining from £56 million to £15 million. Clearly, that’s still far from shabby, but if you consider the magnitude of Arsenal’s profits in the last three years (2008 - £37 million, 2009 - £46 million), it’s a fair old fall.

Of course, headline figures can be highly misleading, so, with apologies to 50 Cent, let’s take a closer look at the underlying factors behind the numbers with 21 questions.

1. Why did the profit fall by so much?

There are two segments in Arsenal’s business: property development’s profit before tax actually rose by £2 million from £11 million to £13 million, while football dramatically fell £43 million from £45 million to just £2 million. Interestingly, chief executive Ivan Gazidis’s report partly attributed lower profits to a “reduced level of exceptional gains… from our property business”, but, even though the revenue was much lower, the profit is definitely higher after the write-back of an £8 million impairment provision and a £4 million reduction in interest payable, as all property debt has been cleared.

The principal reason for the huge decrease in football profit is much lower profit on player sales, which fell from £38 million in 2010 (mainly the sales of Emmanuel Adebayor and Kolo Touré to Manchester City) to £6 million in 2011 (largely Eduardo to Shakhtar Donetsk). The big money sales of Fàbregas, Nasri, Gäel Clichy and Emmanuel Eboué were not included in the 2011 results, as they took place after the accounting close of 31 May.

However, operating profit has also fallen by £11 million from £20 million to £9 million, as revenue was essentially flat at £225 million, while the wage bill surged 12% from £111 million to £124 million. Although player amortisation was £3 million lower, due to the limited investment in new players, this was offset by £3 million of exceptional costs associated with the takeover of the club.

2. Is the football business still profitable?

Yes, but the latest profit of £2 million emphasises how reliant the business model has become on player sales. Excluding the £6 million profit from this activity in 2011 would result in a loss of £4 million, partly due to the annual interest payments of £14 million that the club has had to cover since the club moved to the Emirates stadium.

The graph above highlights how much lower the football profit would have been if Arsenal had not been so financially astute in the transfer market. For example, the thumping great £56 million profit last year included £11 million from property development and £38 million from player sales. Without these exceptional factors, the pure football profit was only £7 million.

It is true that Arsenal still generated a healthy cash operating profit of £46 million in 2011, albeit £11 million less than the previous year, but that excludes non cash flow expenses like player amortisation and depreciation, which have to be absorbed via asset payments.

3. So Arsenal’s profitability is no good?

Far from it. Chairman Peter Hill-Wood observed, “We have had a robust financial performance, reporting another profitable set of full year results” and that’s fair comment. In the highly demanding world of football, very few clubs actually make money, as can be seen by looking at last year’s results when only four teams in the Premier League were profitable: Arsenal way ahead of the rest at £56 million, Wolverhampton Wanderers £9 million, West Bromwich Albion £0.5 million and Birmingham City £0.1 million.

This is emphasised by the huge losses reported by Arsenal’s perennial challengers: Chelsea £70 million, Manchester United £80 million and new kids on the block Manchester City £121 million. In fairness to United, their loss include many exceptional expenses related to the restructuring of their loans and they have recently announced a £30 million profit before tax for 2011.

To underline the Gunners’ focus on financials, Arsenal’s 2011/12 profit should be sensational with the inclusion of this summer’s player sales.

"Robin Reliant"

4. Why did revenue fall so much?

Revenue dropped by £124 million from £380 million to £256 million, but football revenue actually slightly increased by £2 million from £223 million to £225 million, so the fall was entirely due to the expected slow-down in property development, which declined £126 million from £157 million to £30 million.

The Highbury Square business peaked last year with the sale of 362 apartments worth £134 million plus the disposal of the Queensland Road social housing element for £23 million. This year only 69 flats were sold, as the club “sought to achieve value rather than sell off the remaining flats at the fastest possible rate.”

"Unlucky, Theo"

5. So is the property business over?

Not quite, but it’s nearing the end. Only 16 of the original Highbury Square apartments remain to be sold, though 21 additional property units adjacent to that development will also be available from spring 2012.

Three months ago, the Queensland Road market residential element was sold to Barratt, though the revenue and costs associated with this development will only be recognised in the accounts when legal completion occurs. This is estimated to be in summer 2012, so would only be included in the 2012/13 results. No financial details of this sale have been released, but The News of the World estimated that it was worth £25 million to Arsenal.

Discussions are ongoing with Islington Council’s planning department relating to the two remaining property sites on Hornsey Road and Holloway Road.

Importantly, whatever the accounting treatment, these developments will generate a useful chunk of cash, which has been estimated at £40 million in total by the Arsenal Supporters’ Trust. When commenting on the most recent results, Ivan Gazidis specifically noted this factor, “Our property business is debt-free, so any new sales of property do accumulate cash, which is very positive for the future.”

6. What’s happened to the revenue growth?

There has been zero growth since 2009 in the football operation, where revenue has been at the same level for three years: 2009 £225 million, 2010 £223 million and 2011 £225 million.

The only revenue stream that has grown in this period is broadcasting as a result of centrally negotiated deals by the Premier League and UEFA (for the Champions League). Both of the other revenue categories have declined, most notably match day income from £100 million to £93 million. Although the much maligned commercial area rose £2 million last year to £46 million, this is incredibly still £2 million lower than the £48 million reported in 2009.

7. Are other clubs suffering from no revenue growth?

Back in 2005 Arsenal’s revenue of £115 million was the lowest of the traditional Big Four English clubs, £51 million behind Manchester United’s £166 million. The move to the Emirates stadium in 2006 helped drive Arsenal to second place in the English money league, a position they have held since then.

So far so good, but as we have seen, the wheels have come off in the last two years. Chelsea and Liverpool also experienced virtually no growth in 2010, though I would expect Chelsea’s revenue to increase following new sponsorship deals with Samsung and Adidas. Liverpool have also signed lucrative new deals with Standard Chartered and Warrior, though their figures will be hit by the failure to qualify for the Champions League.

The problem for Arsenal (and the other clubs) is that Manchester United’s revenue is still growing apace – from £286 million in 2010 to £331 million in 2011 on the back of significant commercial advances. Not only that, but the Spanish giants have also reported substantial gains in 2001: Real Madrid from £359 million to £417 million and Barcelona from £326 million to £392 million.

8. So is Arsenal’s revenue on the low side?

By no means. Last season Arsenal’s revenue was the fifth highest in Deloitte’s Money League, only behind Real Madrid, Barcelona, Manchester United and Bayern Munich, so they’re hardly on the poverty line.

The issue is that Arsenal are struggling to increase their revenue, while the others are powering ahead. This was explicitly acknowledged by Arsène Wenger, “Barca and Real Madrid have much more financial power than they had 14 years ago, because they have individualised their TV rights.”

That’s certainly true, but Arsenal have also fallen behind on commercial income, where they only stand 13th highest in Europe. Last season their revenue of £44 million in this category was dwarfed by Bayern Munich £142 million, Real Madrid £124 million, Barcelona £100 million and Manchester United £81 million.

Not only that, but the gap is getting wider. While Arsenal’s commercial revenue slightly increased to £46 million in 2011, other leading clubs have all reported substantial improvement. In particular, Manchester United became the first English club to top £100 million from this revenue stream. Their £103 million is now £57 million more than Arsenal. Put another way, that’s the equivalent of ten players on £100,000 a week. A similar level of sponsorship money would revolutionise Arsenal’s wage structure.

9. Why is commercial revenue so low?

Arsenal’s weakness in this area arises from the fact they had to tie themselves into long-term deals to provide security for the stadium financing, which arguably made sense at the time, but recent deals by other clubs have highlighted the lost opportunities. The Emirates deal was worth £90 million, covering 15 years of stadium naming rights (£42 million) running until 2020/21 and 8 years of shirt sponsorship (£48 million) until 2014. Similarly, the club signed a 7-year kit supplier deal with Nike for £55 million until 2012, but that has since been extended by 3 years until 2014.

So, following step-ups, the shirt sponsorship deal is reportedly worth £5.5 million a season, which compares highly unfavourably to the £20 million earned by Liverpool from Standard Chartered, Manchester United from Aon and (reportedly) Manchester City from Etihad. Even more galling is that Tottenham now earn £12.5 million a season from shirt sponsorship (Auresma £10 million plus Investec £2.5 million). It’s the same story on the continent with Barcelona’s first-ever shirt sponsorship deal with the Qatar Foundation worth £26 million.

The news is no better with Arsenal’s kit deal, which now delivers £8 million a season, compared to the £25 million deal recently announced by Liverpool with Warrior Sports and the £25.4 million paid to Manchester United by Nike.

It’s not overly dramatic to say that Arsenal leave at least £30 million a season on the table, because of these historical commercial deals, which would fund the purchase of one great player every season. One of the club’s biggest challenges is how to bridge this gap until 2014, when these deals are up for renewal.

10. What is the club doing about commercial revenue?

New owner Stan Kroenke has said that he “intends to use his experience to help Arsenal continue to grow its global brand”, pledging that they “will be able to do as well as Manchester United.” Quite frankly, that seems a long way off, as United continue to raise the bar, most spectacularly the amazing DHL deal to sponsor training kit for £10 million a season, which exceeds the value of all but four of the main shirt sponsorship deals in the Premier League.

Arsenal have restructured their executive team at great expense, recruiting Tom Fox from the NBA in August 2009 as Commercial Director to “drive long-term commercial success.” However, the proof of the pudding is in the eating and so far there has been a lot of talk about “jam tomorrow”, as opposed to tangible revenue growth.

To be fair, it’s relatively early days in the club’s five-year plan and there are some signs of progress. In particular, a few secondary sponsors have been signed up recently, including Carlsberg at around £3 million a year and Indesit in a “multi-million” deal. In addition, Citroen extended their deal for a higher sum, while there were new agreements with Thomas Cook, replacing Thompson Sport, and on-line gambling firm Betsson. However, Arsenal still have less than half the number of sponsors that partner with Manchester United.

Arsenal’s tour to Malaysia and China was their first long-distance pre-season tour in 12 years and should help grow the club’s global fan base in this valuable market, potentially boosted by the signing of South Korea captain Park Chu-Young. The Guardian reported that the tour would generate £15 million, which seems on the high side, but there’s little doubt that this was a positive financial move, although may not have been ideal in terms of fitness conditioning.

Other improvements are less visible, but may deliver in the future, such as refurbishing the club premium areas and, most intriguingly, signing a multimedia distribution agreement with MP & Silva.

11. What happens if the club fails to qualify for the Champions League?

Arsenal have managed to qualify for the Champions League a remarkable 14 years in succession, though this season the side had to demonstrated impressive resilience to get through a tricky qualifying tie against Udinese. In other words, they have become accustomed to a regular infusion of substantial funds from playing in Europe.

Last season Arsenal received €30 million (£26 million) for reaching the last 16 in the Champions League, which was €3 million less than the previous year, when they progressed a round further. Even if they did not make it out of the group, they would still receive around £25 million, but the prize for doing better is considerable, e.g. last year’s finalists Barcelona and Manchester United received £44 million and £46 million respectively.

Those are just the television distributions, but there are also be additional gate receipts and bonus clauses in various sponsorship deals, increasing the amount of money at stake. In total, we’re probably looking at a £35-45 million potential revenue reduction.

The Europa League's TV distribution is very low in comparison. Last season, the two English representatives, Manchester City and Liverpool, each earned just €6 million for reaching the last 16, while the highest pay-out was only €9 million. However, at least this tournament would still deliver significant gate receipts. As the season ticket includes seven cup games, the price of the ticket would surely have to come down without Europe, so qualification for the Europa League is still worthwhile from that perspective.

In the past, Gazidis has claimed that Arsenal budget so that the club could survive missing a year of Champions League football without selling players, but there’s no doubting the importance of qualification, not least in terms of attracting the right calibre of player to the club, though Liverpool have managed to secure the services of the likes of Luis Suarez, despite being absent from Europe’s flagship competition.

12. What are the implications of slipping down the Premier League?

Even though Arsenal dropped a place to fourth in 2010/11, the Premier League distribution increased £5 million to £56 million, almost entirely due to the substantial increase in overseas rights for the new three-year deal that commenced last season. Excluding overall contract changes, there’s actually not an enormous difference between finishing third and fourth, due to the equitable nature of the distribution methodology.

Each club gets an equal share of 50% of the domestic rights (£13.8 million) and 100% of the overseas rights (£17.9 million). However, facility fees (25% of domestic rights) depend on how many times each club is broadcast live, and this was worth £11.6 million. Finally, merit payments (25% of domestic rights) are worth £757,000 per place in the league table. For example, if Arsenal were to drop, say, four places to eighth that would equate to a £3 million decrease in revenue.

13. Could they have avoided raising ticket prices?

The short answer is, of course they could, as nobody put a gun against their head, especially given that Arsenal enjoy the third highest match day income in the world, only behind Manchester United and Real Madrid. This fell slightly in 2011 from £93.9 million to £93.1 million, even though there was one more home match, as the mix was not so favourable, due to two fewer games in the Champions League. Arsenal’s season ticket prices are already among the highest in the world, though comparisons are difficult, as they include seven cup games.

Arsène Wenger made the reasonable point that the 6.5% price rise was necessary in order “to increase our income to fight with the other clubs”, but there would have been other ways of making a similar sum. For example, a bit more success on the pitch would have generated additional funds, either via a higher Premier League place (second was there for the taking) or more victories in the Champions League (remember Shakhtar Donetsk and Braga away?). Or how about one of the board directors that coined it after the sale of their shares to Kroenke paying the £3 million takeover costs borne by the club?

As the old saying goes, where there’s a will, there’s a way. Unfortunately, the club’s stance was explained by Tom Fox in an interview with an American magazine. After seeing the 40,000 waiting list for season tickets, he said “As a US sports executive… you think, you’re not charging enough for tickets.” In the business world, price increases are often considered the path of least resistance, and football club owners are proving increasingly happy to adopt the same approach, as their “customers” have the fiercest brand loyalty around. After all, an Arsenal fan is hardly likely to switch his allegiance to Spurs.

14. Will the crowd levels hold up?

Arsenal’s average attendance of 60,000 is the second highest in England, only surpassed by Manchester United’s 75,000. In fact, it is the seventh best in Europe. All good, but this level of support should not be taken for granted. Not only is the team less successful, but the quality of football at the Emirates has faded, leading to a less attractive “product” (to use a marketing term). In addition, the effects of the economic crisis mean that some fans will simply be unable to afford to follow Arsenal, a fact acknowledged by Wenger, “The stadiums will be less quickly full and we have noticed that already.”

15. Is it true that Arsenal have spent much less than other clubs on transfers?

Absolutely true. In fact, Arsenal are the only leading club to make money from buying and selling players in the era of foreign ownership (starting from the arrival of Roman Abramovich at Chelsea). Since 2003/04, Arsenal have net proceeds of £21 million, while Chelsea and Manchester City have spent well over £400 million. In the same period, Liverpool, Tottenham and Manchester United have all spent around £100 million.

Billy Beane, one of the pioneers of the Moneyball approach to buying under-valued players, is a big fan of Wenger’s approach, “When I think of Wenger, I think of Warren Buffett. He runs his football club like he is going to own it for 100 years.” Stan Kroenke clearly shares his view, praising Wenger for “his ability to spend money and extract value.”

This is all well and good, but in a time when other leading clubs are generously funded by benefactor owners, some compromise might be in order. Indeed, Gazidis promised a busy summer and Arsenal splashed out £53 million on new players. Of course, they still ended up with net sales proceeds of £18 million, as players leaving brought in £71 million. If decent offers had come in for the likes of Nicklas Bendtner, Manuel Almunia, Sébastien Squillaci and Denilson, this sum may well have been even higher.

"Jackie Wilshere said"

16. How much is available to spend on transfers?

Before the summer transfer window, Ivan Gazidis said that Arsenal had a substantial transfer budget, “Financially, we're in a strong position. We have resources to spend. We're certainly not sitting there saying 'Let's hold back on our resources for some reason.' Why would we? The resources are there.” My own estimate was that the club had £35 million available excluding any surplus cash from property development. Everything else being equal, as we have seen, the summer’s activity should have produced another £18 million, which would theoretically mean a transfer budget of £53 million.

Some fans look at the club’s cash balances of £160 million, up from £128 million a year ago, and think that more money must be available, but the club has to maintain a debt service reserve for the stadium financing and also has to consider the seasonal nature of cash flows, e.g. money taken from season ticket renewals at the beginning of summer will be used to pay expenses over the next few months.

Nevertheless, it is clear that a sizeable war chest is still there, as Gazidis recently confirmed, “We deliberately kept some powder dry… There are funds available to invest in a significant way in January and next summer.” Whether the club does so is another matter, though any expenditure in January might pay for itself if it makes the difference between qualifying for the Champions League or not.

17. But what about the wages?

While Arsenal could almost certainly afford to pay transfer fees for new players, there remains the question of whether they could also afford to pay the wages. On the face of it, this should not be a problem, as Arsenal’s wage bill of £124 million is one of the highest in England. Although it is £29 million lower than Manchester United’s £153 million, that was inflated by performance-related bonus payments, so the real difference is much lower.

That said, Arsenal’s wage bill in 2010 of £111 million was overtaken by both Manchester City £133 million and Liverpool £114 million, plus it was considerably lower than Chelsea’s £173 million, though that should reduce following the departure of a number of senior players.

The pressure to compete is obvious by the deterioration in Arsenal’s wage to turnover ratio from 46% in 2009 to 55% in 2011. Although this is still one of the best in the Premier League, it is the logical result of flat revenue and 20% growth in wages (12% last season alone).

Given the magnitude of Arsenal’s wage bill, it seems strange that they do not pay top dollar to their star players, but this is due to a couple of factors. First of all, Arsenal have a very large squad with a vast number of “young professionals”, but more importantly they operate an equitable wage structure, which means that the best players are not particularly well remunerated (by modern standards), while fringe players like Abou Diaby, Thomas Rosicky and Marouane Chamakh are handsomely rewarded for their efforts. Not only does this reduce the money available to attract world class players, but it also makes it difficult to move on under-performers, hence loans for Bendtner and Denilson.

This approach needs a root and branch review, as it cannot be adjusted for an individual player or others will soon demand equivalent pay rises. This is a concern with some key players entering the final year of their contracts like Robin Van Persie, Thomas Vermaelen and Theo Walcott. Van Persie has already complained that Arsenal will not pay “enormous amounts of money”, hinting that this encourages a player’s decision to “go elsewhere.” This issue was tacitly confirmed by Wenger, “I cannot today say that if we go to the maximum we are sure to sign a player.”

18. Can the club pay off its debt?

Following the elimination of the property debt, the club has managed to reduce its gross debt to £258 million, leaving just the long-term bonds that represent the “mortgage” on the Emirates Stadium (£231 million) and the debentures held by supporters (£27 million). Once cash balances of £160 million are deducted, net debt is down to only £98 million, which is a significant reduction from the £136 million last year and the £318 million peak in 2008.

It’s not clear whether it would be possible for Arsenal to pay off the outstanding debt early in order to reduce the interest charges, but my guess is that they are in no hurry to do so, as Gazidis has previously argued that not all debt is bad, “The debt that we’re left with is what I would call ‘healthy debt’ – it’s long term, low rates and very affordable for the club.” In any case, the 2010 accounts clearly stated, “Further significant falls in debt are unlikely in the foreseeable future. The stadium finance bonds have a fixed repayment profile over the next 21 years and we currently expect to make repayments of debt in accordance with that profile.”

"No doubting Thomas"

19. Will UEFA’s Financial Fair Play help Arsenal?

Many fans believe that the FFP regulations will benefit Arsenal, as they force clubs to live within their means if they wish to compete in Europe. The theory was that this would lead to the demise of the big spending, benefactor model, while encouraging those teams who adopted a self-sustaining approach. Clearly, Arsenal will have no problem complying with the new rules, but other leading clubs are maybe not so badly placed as once feared.

Real Madrid and Bayern Munich have been consistently profitable, thanks to their huge revenue, while Barcelona have also reported regular profits except when there is a change in club president. Even Manchester United now make profits despite their ample interest payments.

Clearly, FFP will be more of a challenge for clubs like Manchester City and Chelsea, who make huge losses, but UEFA have made it easier for such clubs to conform. First, UEFA’s break-even calculation is not exactly the same as a club’s statutory accounts, as it excludes certain expenses, including depreciation on tangible fixed assets and expenditure on youth development and community development activities.

"Most ox-cellent"

Second, wealthy owners will be allowed to absorb aggregate losses (so-called “acceptable deviations”) of €45 million (£39 million), initially over two years and then over a three-year monitoring period, as long as they are willing to cover the deficit by making equity contributions.

If that wasn’t enough, clubs will be allowed to exclude wages from players signed before June 2010, so long as they are reporting an improving trend in their accounts. Granted, that “loophole” only exists for the first two monitoring periods (2013/14 and 2014/15), but it will buy the clubs time to improve their finances.

Finally, there has to be a concern that accountants and lawyers will look to bend the rules. Wenger accused Manchester City of doing just this with their £400 million Etihad deal, “They give us the message that they can get around it by doing what they want. It means financial fair play will not come in.”

In short, FFP may not prove to be the cavalry coming over the hill that some imagined for Arsenal. If it is, then it will be a good few years before it bites.

"Rambo - first touch"

20. What are Stan Kroenke’s plans?

All indications point to Kroenke being an owner that prefers not to interfere with those running the club, which he confirmed in a recent interview with the Daily Telegraph, “The idea is to put good people in place and trust them to do their jobs.” In fact, he has said that Arsène Wenger can remain at Arsenal for as long as he likes. However, you would have to think that he would take steps to protect his investment if it looked like Arsenal were struggling financially.

Although he is unlikely to push for a massive spending spree (“There’s a risk of going backwards if you over-react and start throwing money around in an attempt to solve your problems”), he is not afraid to spend, e.g. his Denver teams are among the top spenders in the NBA and NHL, while the St Louis Rams have spent the maximum allowed under the NFLsalary cap rules.

He is a long-term investor who has never sold a share in one of his sporting clubs, but if he did want an exit route at Arsenal, then Alisher Usmanov, who holds just over 29% of the club’s shares, would happily provide it. He has offered £14,000 a share, which is considerably higher than the £11,750 that Kroenke paid to take his stake to around 67%. That seems unlikely, given Kroenke’s excitement about the potential at Arsenal, not least the global opportunities offered by broadcasting the Premier League.

"Pole apart"

21. What could Arsenal do to improve their finances?

Bearing in mind Peter Hill-Wood’s assertion that “strong financial performance is not an end in itself, but creates the platform from which the club can build and sustain the on-field success which is always the main objective”, there are a few actions that Arsenal could take:

a. Renegotiate the main sponsorship deals. Although these are only due for renewal in 2014, there must be some mileage in trying to negotiate an increase now in return for guaranteed renewal. Obviously, Arsenal’s ability to maximise value would be stronger if the team is winning trophies.

b. Review the wages structure to make it easier to attract world-class stars.

c. Offload under-achieving players, even if they are sold cheaply or given away, in order to have some room to manoeuvre in the wage bill.

d. Buy quality in January. This could boost the team’s performance in the second half of the season, as happened with Liverpool last season, and ensure that the likes of Van Persie don’t jump ship.

e. Rebuild the famous scouting network. It seems like ages since they beat other clubs to the best talent worldwide.

"Don't look Bac in anger"

f. Kroenke could loan the club funds to fill the hole until the commercial machine starts buzzing. He might even pay off the outstanding debt to remove the interest burden.

g. Consider a rights issue. Although an expensive (and unlikely) option, this would also raise money and might even extend the fans’ ownership scheme.

h. Inject some new blood onto the board. Former director Lady Nina Bracewell-Smith suggested that the current directors should be replaced by a more “dynamic, pro-active, younger board”, while Usmanov accused the board of lacking ambition.

i. Review the training and medical practices. Arsenal’s lengthy injury list, including crucial players like jack Wilshere and Thomas Vermaelen, has severely damaged their prospects for a few seasons. There surely must be more to it than simple misfortune.

Obviously, it’s not all doom and gloom at Arsenal. They have a fabulous stadium, a renowned academy, a great manager and a few top quality players. However, it does feel as if the club is at a crossroads and the decisions they take over the next few months could be very important for Arsenal’s future, both on and off the pitch.

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